AFRICA

Trading island style

Mauritius is a small island off the coast of Africa, just East of Madagascar. Historically known as the “star and key” of the Indian Ocean, the popular tourist destination has traditionally been a haven and springboard for business in and out of the continent.

With a population of approximately 1.3 million people, the island is today coming under spotlight for its ‘competitive’ approach to taxation, specifically when looking at areas such as capital gains tax. South African (SA) and foreign companies alike are now making use of experts and services from the island to avoid lengthy and costly legislation back home.

During a recent trip to the island, Opportunitycaught up with Richard Robinson, President of the South African Chamber of Commerce in Mauritius, to find out more about doing business on the island and the benefits it could have for SAcompanies.

“Many SA Corporates do not realise how Mauritius could enhance its business. Mauritius has marketed itself extremely well as a holiday destination, but not necessarily as a corporate destination. There is a wealth of knowledge in this country across many different industry sectors. Various opportunities exist to work in this open-exchange environment, where the bureaucratic costs are far less than you would find in SA. This is a low-tax jurisdiction, so using Mauritius to access the world, specifically Africa, is a very viable proposition for SA companies. There is a good reason why a number of large SA companies have established subsidiaries and operations here,” he says.

According to Robinson, the biggest company on the island (by turnover) is in fact a SA company. Aspen Pharmaceuticals established a base on the island responsible for all its operations outside of sub-Saharan Africa. The business employs over 150 people of which 90% are Mauritian. “They meet all the criteria in terms of the Double Taxation Agreement, as they have a significant presence on the island and management control vests in Mauritius. Similarly Vodacom, SAA, SA Breweries, Old Mutual, Sanlam, Standard Bank, Investec Bank and Nedbank are all represented here. You have a significant contingent of SAcompanies using Mauritius as a stepping stone to other destinations,” he says.

Renewed DTA agreement

But getting a foothold on the island entails fulfilling a few requirements. Robinson highlights that companies require a physical presence on the island. Employing local staff and renting premises etc. all have a positive impact on the economy and assist you to meet the requirements of the recently renewed DTA agreement between SA and Mauritius. “The executive decisions need to be made in Mauritius, and it doesn’t mean you can just fly people in from SA, make decisions and fly back again. You actually have to prove that you have substance in the country.”

“From the Mauritian government’s perspective, it is very advantageous that people are bringing intellectual capability to the island that they did not previously have, and that they are passing that on and upskilling the Mauritian people. So there’s a big push from their side to facilitate companies wishing to establish operations on the island, and ultimately to transfer this knowledge to Mauritians.” he says.

Robinson further points out that Mauritius has a very professional Board of Investment (BOI) which has been positive for business on the island. According to him, the BOI is “the shop front for any foreigner wanting to do business”. Robinson says the “well-oiled machine” has a strong management and staff component that understands the needs of foreigners. They also assist in facilitating business between various government departments, ranging from matters relating to licensing, to access to the various ministries. “They have become more professional, certainly over the 12 years that I have been here. They take away a lot of the noise when dealing with the different departments and try to smooth the waters,” he says.

Robinson manages an investment business and says Mauritius leans more towards facilitating management within its regulatory environment, compared to SA. He says SA has a very highly regulated environment, “some would even say overly regulated”. He says there are many advantages to running an investment business from Mauritius, especially when you need to access the full range of international opportunities across multiple currencies. Tax advantages aside, the primary drivers are the availability of educated staff, no exchange control, a good time zone and the relatively low cost of doing business.

“Mauritius has been actively trying to ensure it complies with the likes of the OECD and the EU with respect to its regulatory environment. It is an early adopter of the OECD CRS and FATCA and has white-listed these institutions. Our clients need to be able to transact all over the world and this is not restricted in Mauritius. Purely from a financial perspective it is much easier for us to mobilise their money, if they want to buy property in London, we can facilitate this with relative ease.

“Domestically, I think Mauritius holds limited opportunities for SA Corporates. The domestic market is small and disposable income is limited. The island is well known for its tourism sector as well as the textile industry. In both these areas Mauritians have excelled and offer world class products. The real opportunity, however, is to use Mauritius as a stepping stone to the rest of the world, whether it is in finance or trading,” he says.

Strong competition

Robinson also points out that there is strong competition on the island. He says both the Chinese and the French are good traders that control strong international brands in Mauritius. According to him you simply cannot export a successful SA brand to the island and expect it to flourish in that market, without having conducted proper market research first. There are numerous case studies of failed ventures where this has transpired.

Mauritius has a clearly defined economic development strategy for the next five years. As Robinson explains, the strategy covers every single sector of the island’s economy: “It is a very well thought-out document”. He says there are approximately 300 points identified in it, in terms of where they want to take the economy. He admits that if only 50% of this wish list was achieved, he would be the first one to congratulate the Mauritian government because it is a huge ask. “If you don’t dream big, if you don’t set the bar high, it is very easy to achieve it. So I say hats off to them, because if this sets the tone for future government of this country to aspire to, it would be superb,” he told Opportunity editor, Lindsay King.

Robinson highlights that one of the biggest and most important points on the document is uplifting the poverty stricken. He says Mauritius calls their political regime innovative socialism. According to him this might scare off some capitalists, but he says after reading the document it is quite clear that the economic wellbeing of the country is inextricably linked to all its citizens being financially viable. For this reason upliftingthe poor is a primary concern for the government, and he fully supports this.

“I think bridging the gap between the ultra-wealthy and poor is a good idea. How you achieve that is where opinions differ. Mauritius has created a corporate social responsibility requirement for every domestic company and 2% of their profits have to be poured back into CSR programmes and they can decide which CSR programmes it goes to. In fact, a lot of Corporates employ a CSR person who is responsible to actually distribute that money and make sure that it is applied correctly. This includes building houses, educating children, assisting sports clubs and a variety of other meaningful programmes,” he says.

Taking a closer look at trade relations between SAand Mauritius, Robinson says he absolutely believes there is scope for more trade, but that from a SA perspective; “SA sees Mauritius as a major competitor and I do not believe it is”. He backs this up by saying that in the greater scheme of things, the size of the Mauritian economy is tiny in relation to SA and is “really a drop in the ocean”, but he says the countries can certainly work hand-in-hand.

“There should be far more agreements between the two countries, far more bilateral trade. There is the freedom of information and tax sharing arrangements, to mention but a few. It is not like Mauritius is trying to do something clandestinely at all. We have had a number of trade delegations, including the SA trade delegations, coming through here. We have even had the SA Police coming through and engaging with us and they were saying Mauritius has some very good policies. These policies could not be implemented in SAbecause it is mired in beaurocracy and you would need to get 50 people to sign off a forward before it even got to the right person. So I think the depth of your civil service in SA is just too deep to ever implement it. Here it is a very flat structure and we can easily access government.

“If we need to meet with the minister in a particular sector, we can meet with the minister. We can arrange a meeting within generally speaking a month (depending on the minister’s schedule). I don’t think you can do this in SA. You would have to go through a myriad of secretaries. Here there is willingness for the ministers to actually talk with you and engage with you. I have had meetings on two days notice with ministers. They are looking for inward investment, and they are keen to try and explore ways to increase it and to uplift their own communities. So as always, if you can bring something positive to the table and you are not going to sit and complain to them about something, then they are keen to engage with you,” he concludes.